How to Use Home Equity to Buy Another Home in Phoenix
How Much Equity Do You Actually Have
Before you can use your equity you need to know what you are working with.
Equity is the difference between what your home is worth today and what you still owe on your mortgage. If your home is worth $650,000 and your remaining loan balance is $380,000, you have $270,000 in equity. That is real capital that can be accessed and deployed.
Phoenix homeowners who purchased between 2018 and 2022 have seen significant appreciation even accounting for the market normalization that followed the 2022 peak. Average sale prices in many Valley submarkets are still running well above where they were four and five years ago. That appreciation has built equity quietly in the background for a lot of homeowners who have not stopped to look at what their property is actually worth today.
The first step is getting a current market valuation. Not Zillow. Not what your neighbor sold for two years ago. An actual comparative market analysis from someone who knows the submarket and is pulling live data. That number is the foundation of every strategy that follows.
The Three Main Ways to Use Home Equity to Buy Another Home
There is not one way to tap equity. There are several, and the right one depends on your goals, your timeline, your current loan, and what you are trying to accomplish with the next purchase. Here is how each one works.
Cash-Out Refinance
A cash-out refinance replaces your existing mortgage with a new, larger loan and gives you the difference in cash at closing. If you owe $300,000 on a home worth $600,000, you might refinance into a new $450,000 loan, pay off the old one, and walk away with $150,000 in cash that can be used as a down payment on the next property.
The upside is that you get a lump sum with a fixed repayment structure and a single monthly payment. The consideration is that you are taking on a new rate on your entire balance. If your current rate is low, a cash-out refi means giving it up. In today’s rate environment that calculation matters and needs to be run carefully before you commit. We do that analysis in house before recommending this route to anyone.
Home Equity Line of Credit (HELOC)
A HELOC is a revolving line of credit secured against your home’s equity. Think of it like a credit card backed by your house. You are approved for a maximum draw amount and you pull from it as needed, paying interest only on what you actually use.
HELOCs are flexible and do not touch your existing first mortgage or its rate. If you have a 3% rate from 2021 you want to keep, a HELOC lets you access equity without disturbing it. The tradeoff is that HELOC rates are typically variable, tied to the prime rate, and the draw period eventually converts to a repayment period. For buyers who need a down payment on the next home and want to preserve their current mortgage structure, a HELOC is often the cleanest path.
Bridge Loan
A bridge loan is a short-term loan that uses your current home’s equity to fund the purchase of the next one before your current home sells. It bridges the gap between the two transactions so you can buy without the pressure of having to sell first.
Bridge loans carry higher rates than traditional financing because they are short-term instruments, but they solve a real problem. They let you make a clean, non-contingent offer on the next home — which is a significantly stronger position in any negotiation — without having to time the sale of your current home perfectly. Once your current home sells, the bridge loan gets paid off. We work with buyers on bridge financing regularly and it is one of the more underutilized tools in the move-up buyer playbook.
Using Equity to Buy an Investment Property
Not every equity conversation is about a primary residence upgrade. A significant portion of the homeowners we work with want to use their equity to buy a rental property, a short-term rental, or an investment flip rather than a move-up home.
The strategy works the same way. Pull equity through a cash-out refi or HELOC, use it as a down payment on an investment property, and let the rental income service the additional debt while the investment property builds its own equity over time. Done right, this is how a single primary residence becomes the foundation of a real estate portfolio.
The math needs to work. The rental income needs to cover the debt service on the investment property with enough margin to make the risk worthwhile. We run those numbers before any client commits to this strategy. If you want to dig into where the strongest investment opportunities are in the Valley right now, I have a full breakdown on where to invest in the Phoenix metro that covers the data by submarket.
The Move-Up Buyer Scenario: Buy First or Sell First
This is the question we get more than almost any other from equity-rich homeowners in Phoenix. Do you buy the next home first and then sell, or sell first and then buy?
Both paths have real trade-offs and the right answer depends on your financial position, your risk tolerance, and the specific market conditions in your submarket at the time you are making the move.
Selling first gives you certainty. You know exactly what you netted, you are not carrying two mortgages, and you can make a clean offer on the next home with full cash clarity. The downside is that you may need temporary housing between the sale and the next purchase, and in a competitive market a contingent offer tied to your sale is a weaker negotiating position.
Buying first with a bridge loan or HELOC gives you the ability to secure the next home without the pressure of a simultaneous closing and lets you make a non-contingent offer. The risk is carrying two payments temporarily if the current home takes longer to sell than expected.
We navigate this regularly and the answer is almost always specific to the individual situation. I cover the full buy and sell at the same time strategy in a separate post that is worth reading if you are in this position right now.
Why Having Real Estate and Lending In House Changes Everything
Most homeowners who want to use equity to move up or invest have to coordinate between two completely separate professionals — a real estate agent who understands the market and a lender who understands the financing. Those conversations happen in silos and important details get lost between them.
We do not operate that way.
I hold an active mortgage license alongside my real estate license, which means the equity strategy conversation, the financing structure, and the real estate execution all happen in the same room with the same person. When you call me about using your equity to buy another home, we are not starting with a referral to someone else. We are starting with your actual numbers, your current loan, your goals, and building a plan that accounts for all of it from day one.
That matters more than most people realize. The decision between a cash-out refi, a HELOC, and a bridge loan is not just a financing decision. It is a real estate strategy decision. The structure you choose affects your offer strength, your timeline, your tax position, and your negotiating leverage on the next purchase. Having someone who understands both sides of that equation is a meaningful advantage and it is not something most buyers have access to in a single conversation.
What to Do Next If You Are Sitting on Equity in Phoenix
If you bought in the last five to seven years and have not looked at what your home is worth today, that is the starting point. Get a real number. Then we can talk through what you are trying to accomplish — whether that is a move-up home, a rental property, a second home, or something else — and build the right strategy around your actual equity position.
This is something we do regularly for homeowners across the Valley. The conversation is straightforward and it costs you nothing to have it.
Call or text me at (602) 935-6959, email Robbie@RJHHomesTeam.com, or visit rjhhomesteam.com.
Robbie Holycross is the founder of RJH Homes and has been working with buyers, sellers, and investors across the Valley for 6 years. He holds a background in finance and economics and carries an active mortgage license (NMLS 2633845), specializing in move-up buyers and real estate investors throughout the greater Phoenix metro.
Home Equity Options Comparison
| Option | How It Works | Best For | Typical Rate | Risk Level |
|---|---|---|---|---|
| HELOC | Revolving credit line against equity | Bridge funding, flexible needs | Variable (7-9%) | Medium |
| Home Equity Loan | Lump sum, fixed payments | Known amount needed | Fixed (7-9%) | Medium |
| Cash-Out Refinance | Replace mortgage with larger one | Large equity, rate improvement | Fixed (6-8%) | Medium |
| Bridge Loan | Short-term loan secured by current home | Buy before selling | Higher (8-12%) | Higher |
| Sale Contingency | Make offer contingent on selling first | Conservative buyers | N/A | Low |
| Rent-Back Agreement | Sell first, rent back while buying | Risk-averse sellers | N/A | Low |
Sources: Consumer Financial Protection Bureau, Bankrate Mortgage Rates, National Association of Realtors
Frequently Asked Questions About Using Home Equity
Keep Reading
If you found this helpful, check out these related articles:
- Buy and Sell at the Same Time in Phoenix
- How to Price Your Home Right in 2026
- Hidden Costs of Buying a Home in Arizona
- Sell My Home
How much equity do I need to buy another home?
Most lenders require you to maintain at least 15-20% equity in your current home after borrowing, meaning you can typically access 80-85% of your home’s value minus what you owe.
Most lenders require you to maintain at least 15-20% equity in your current home after borrowing, meaning you can typically access 80-85% of your home’s value minus what you owe. For example, if your home is worth $500,000 and you owe $300,000, you have $200,000 in equity. You could potentially access $100,000-$125,000 while keeping the required 15-20% equity cushion. This amount can serve as a down payment on a second property, cover closing costs, or fund a bridge loan. Your credit score, debt-to-income ratio, and the lender’s requirements also affect how much you can access.
Can I use a HELOC to buy a second home in Arizona?
Yes — a HELOC (Home Equity Line of Credit) is one of the most flexible ways to access equity for a second home purchase.
Yes — a HELOC (Home Equity Line of Credit) is one of the most flexible ways to access equity for a second home purchase. You can draw funds as needed, only pay interest on what you use, and repay as your situation changes (such as when your first home sells). HELOCs in 2026 typically carry variable rates around 7-9%. The advantage for Arizona buyers is flexibility: you can use HELOC funds for a down payment, compete with cash offers, or cover the gap between buying and selling. The risk is that variable rates can increase, and you’re using your home as collateral.
Should I sell my home first or buy first in Phoenix?
This depends on your financial position and risk tolerance.
This depends on your financial position and risk tolerance. In the 2026 Phoenix market, selling first is the safer approach — you’ll know exactly how much equity you have and can make a stronger offer without a sale contingency. However, this means you may need temporary housing between transactions. Buying first lets you move once but requires carrying two mortgages temporarily, which most lenders will stress-test in your qualification. A skilled agent can help structure the timing — strategies like extended closing periods, rent-back agreements, or bridge financing can minimize the gap between transactions.
What is a bridge loan and should I use one?
A bridge loan is a short-term loan (usually 6-12 months) that uses your current home’s equity to fund the purchase of a new home before your existing home sells.
A bridge loan is a short-term loan (usually 6-12 months) that uses your current home’s equity to fund the purchase of a new home before your existing home sells. Bridge loans carry higher interest rates (typically 8-12%) and additional fees, but they let you buy without a sale contingency — making your offer more competitive. In the Phoenix market, bridge loans make the most sense when you’re confident your current home will sell quickly (strong neighborhood, good condition, realistic price) and the new home you want is in a competitive situation where a contingent offer would lose. They’re not ideal if your current home has potential selling challenges.
How does a cash-out refinance work for buying another property?
A cash-out refinance replaces your existing mortgage with a new, larger mortgage — and you receive the difference in cash.
A cash-out refinance replaces your existing mortgage with a new, larger mortgage — and you receive the difference in cash. For example, if you owe $250,000 on a home worth $500,000, you could refinance for $400,000 and receive $150,000 in cash (minus closing costs) to use as a down payment on another property. This only makes financial sense if the new mortgage rate is comparable to or better than your current rate. In 2026, with rates around 6-7%, this works well for homeowners whose current rate is similar. If you locked in a 3-4% rate during 2020-2021, a cash-out refinance would increase your rate significantly — making a HELOC or bridge loan a better option.
